Clean Mobility

FAME II to drive India’s EV growth

Approved by the union cabinet on March 1, 2019, the Faster Adoption and Manufacturing of Electric Vehicles II (FAME II) initiative is expected to give a shot in the arm to the country’s e-mobility plans. FAME II, an extension of FAME I, is wider and more inclusive in scope, and entails a much larger financial outlay. Apart from offering subsidies for the purchase of electric vehicles (EVs), it has included charging infrastructure in the framework of incentives, which will provide an impetus to the establishment of public charging facilities across the country. Moreover, by imposing suitable eligibility conditions for availing of demand incentives, the scheme promotes the growth of domestic technology and manufacturing capabilities as well as incentivises the use of advanced battery technologies. With more than half the allocation going towards e-buses and e-three-wheelers, including e-rickshaws, the focus of FAME II is on creating green mass transport systems.

FAME II

Objective: FAME II aims to promote e-mobility in the country, and is an expanded version of FAME I, which was launched on April 1, 2015. The scheme will be implemented through three verticals – demand incentives, establishment of a network of charging stations and administration of the scheme, including its publicity. The key focus area of the scheme is electrification of public transportation, including shared transport. It provides demand incentives for e-buses (on an operational expenditure model), three-wheelers and four-wheelers used for public transport or registered for commercial purposes. Besides this, it provides incentives for two-wheelers in the private vehicle segment.

Implementation: The Department of Heavy Industry (DHI) is the nodal agency for planning, reviewing and implementing the scheme. Meanwhile, the inter-ministerial Project Implementation and Sanctioning Committee (PISC), headed by the secretary of DHI, will be responsible for the overall monitoring, sanction and implementation of the scheme. Its terms of reference include modifying the coverage parameters for various components and subcomponents of the scheme, reviewing the demand incentives, annually or earlier based on the price and technology trends, modifying the limits of fund allocation among different segments and types of vehicles, reviewing the maximum incentive per vehicle, and deciding other scheme parameters for its smooth roll-out.

Outlay: The scheme entails a total outlay of Rs 100 billion, which is about ten times more than the Rs 8.95 billion that had been set aside for the first phase. The scheme will be implemented over a period of three years, from 2019-20 to 2021-22. Component-wise, the scheme envisages an expenditure of Rs 85.96 billion on demand incentives, Rs 10 billion on charging infrastructure and Rs 0.38 billion on administrative expenditure. Vehicle-wise, the scheme aims to provide demand incentives of Rs 35.45 billion for e-buses, Rs 25 billion for e-three-wheelers, Rs 20 billion for e-two-wheelers, Rs 5.25 billion for e-four-wheelers, and Rs 0.26 billion for 4 W strong hybrid vehicles. The scheme allows flexibility in changing the allocation among its various components and subcomponents as well as year-wise allocations.

Demand incentives: In order to encourage the adoption of EVs, the scheme provides incentives for demand generation by reducing the cost of EVs. Demand incentives will reduce the purchase price of hybrid and EVs – e-buses, four-wheelers (plug-in hybrid and strong hybrid), e-three-wheelers (including registered e-rickshaws) and e-two-wheelers to enable wider adoption. The incentives offered will be based on the battery capacity used in the vehicles. Vehicles fitted with advanced batteries such as lithium-ion batteries, which satisfy certain performance criteria, will be eligible for the incentives. The scheme will set a maximum threshold value (ex-factory price) to prevent high-end vehicles from availing of these incentives. As per other conditions under the scheme, the vehicle must be manufactured in the country, meet the minimum localisation requirements, satisfy minimum technical eligibility criteria, adhere to the provisions of the Central Motor Vehicle Rules, and offer a three-year comprehensive warranty. With regard to the quantum of benefits, the scheme extends a maximum incentive of Rs 20,000 per kWh for e-buses and Rs 10,000 per kWh for all other vehicles. The cap on incentives for buses will be 40 per cent of the cost of vehicles. For all other categories, it will be 20 per cent. Overall, the scheme aims to incentivise the purchase of 1 million e-two-wheelers, 0.5 million e-three-wheelers, 35,000 e-four-wheelers and 7,090 e-buses. For e-buses, demand incentives will be provided only on the operational expenditure model adopted by the state/city transport corporations. For other vehicles, demand incentives will be disbursed through an e-enabled framework set up by the DHI. The proposed incentives under the scheme will be reviewed by PISC annually, or earlier, depending on the price trends.

Charging infrastructure: The scheme proposes the establishment of about 2,700 charging stations in metros, smart cities, Tier II cities and hilly regions. It aims to set up at least one charging station in a grid of 3 kmx3 km. For highways connecting major city clusters, it proposes to set up charging stations on both sides of the road at an interval of about 25 km. For charging of e-buses, one slow charger per e-bus and one fast charger for 10 e-buses will be provided under the scheme. The entire charging infrastructure will be established as per the Ministry of Power’s (MoP) guidelines and standards for EV charging infrastructure notified in December 2018. Apart from this, the scheme encourages the interlinking of charging infrastructure with renewable energy, smart grid, information communication technology, etc.

Conclusion

FAME II is a step in the right direction for promoting e-mobility in the country. It provides a stable policy framework to drive green mobility in India, thereby addressing the concerns of environmental pollution and fuel security. The scheme also encourages the adoption of domestic technology and manufacturing, thereby promoting Make in India. The scope of incentives that were previously restricted to EV manufacturers and suppliers has been expanded to encourage investments in the development of a holistic e-mobility ecosystem, comprising service providers, last-mile connectivity operators and shared mobility service providers. In recent months, e-mobility has taken centre stage in government policies. In December 2018, the MoP released policy guidelines for EV public charging infrastructure. The setting up of public charging infrastructure will be a delicensed activity as per the policy guidelines. Further, power tariffs for EV charging will be determined by the appropriate commission and will not exceed the average cost of supply, plus 15 per cent. Meanwhile, Maharashtra, Delhi and Karnataka have already issued their e-mobility policies.

To conclude, FAME II is a significant step towards achieving cleaner and greener mobility in India. The scheme will encourage greater investment in charging infrastructure and vehicle manufacturing. With public transportation as its key focus areas, the scheme will play a major role in achieving the 30 per cent e-mobility target by 2030.